Making the labour market work betterA Capita/DfES case study

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Page 1: The New Deal

Unemployment is one of the worst social evils. It saps the self-confidence and motivation of those it affects directly and has knock-on effects for all members of society. By under-utilising labour, the wealth and economic well-being of the country is reduced. Unemployment can also produce poverty and social exclusion.

Taking policy measures to reduce unemployment should therefore be high on the agenda of any government. Today, unemployment is a European-wide issue with over 18 million unemployed people across the European Union. The seriousness of this issue is recognised and the European Council at Amsterdam has agreed a new employment chapter in the Treaty, Council Conclusions on Employment and a Resolution on Growth and Employment. These set a clear agenda at a European level for action to create jobs and attack social exclusion. The primary responsibility for tackling unemployment, however, remains at member state level.

This case study examines the importance of creating an effective labour market in order to reduce unemployment. In particular, it focuses on a specific government economic measure, the New Deal, as an example of the way in which governments can use policy measures to create a more efficient labour market and increase employability. The New Deal is a labour market initiative which aims to improve an individual's employment prospects and reduce the incidence of long term unemployment by ensuring a continued attachment to the labour market.